Broad money expanded again in April. A 0.1 percent monthly increase lifted annual M3 growth from an unrevised 0.9 percent to 1.3 percent, boosting the headline 3-monthly change from 0.4 percent to 0.8 percent. The data were just a little weaker than the market consensus.

The increase in April's annual rate was again largely attributable to narrow money M1 where the yearly rate of decline eased from 6.6 percent to 6.0 percent, its strongest reading since April 2023. Amongst the M3 counterparts, private sector loans were up 0.5 percent on the year after a 0.4 percent increase previously and, after adjustment for loan sales and securitisation as well for positions due to notable cash pooling services, 0.9 percent following a 0.8 percent gain. Within the latter, adjusted loans to households held steady at 0.2 percent while borrowing by non-financial corporations (0.3 percent after 0.4 percent) slowed marginally.

The April data remain in line with a gradual recovery in the Eurozone economy and, while hardly robust, will do nothing to prevent the ECB cutting key interest rates next week. Today's update trims the Eurozone RPI and RPI-P to 24 and 28 respectively but both measure still show economic activity in general running quite well ahead of market forecasts.

The 3-month moving average annual rate is expected to climb to 0.9 percent in April following March's as-expected 0.4 percent increase that extended a trend of gains.

M3 is the European Central Bank's (ECB) preferred broad measure of money supply. Since January 1999, the ECB has tended to focus on the 3-month moving average of the annual growth rate to judge underlying M3 trends although the significance of its 4.5 percent reference rate has been downgraded with time. The private sector lending counterpart is usually seen as the most important element of the M3 report.

While other central banks have virtually ignored money supply data, the European Central Bank has not. Thanks to the influence of the Bundesbank in organizing the ECB, M3 money supply was established as one of the 'two pillars' of monetary policy used by the ECB, the other being the harmonized index of consumer prices (HICP). While the target for HICP is two percent, the seemingly largely ignored reference target for M3 growth is 4.5 percent as measured by a three month moving average which is compared with the same three months a year earlier.

M3 measures overall money supply. It consists of M1 which is currency in circulation plus overnight deposits and M2 which include deposits with an agreed maturity up to two years plus deposits redeemable at up to three months' notice. Not all M3 measures are alike. For example, ECB M3 is approximately equivalent to the Federal Reserve's M2 measure. Because an increase in M3 leads to price inflation, this figure can also be indicative of the likelihood of future interest rate hikes.